The financial plan provides a full view of the business potential, the profitability, cash requirements, and financial risks. The financial plan should contain the following:

The financial highlights

Proforma reports

Operational budget

The main assumptions

Financial highlights

The financial highlights should include the following information in tables and graphs:

Projected sales and revenues

Projected net profit

Projected cash flow

Break even analysis

Payback period

Sensitivity analysis

Financial requirements

Main assumptions

Example: The Financial Highlights

Willow Corporation's projected revenues for the period 20xx -20xx are about 48 million dollars, which yield over 9.8 million dollars operating profit (20 % return on sales). After the first 5 years, sales of 12.5 million dollars and operating profit of 2.7 million dollars are expected.

Willow Corporation plans to be profitable within one year, with an expected payback period of 2 years (based on 0.6 million dollars investment).

The expected N.P.V. (Net Present Value - discounted by 15%) is about 4.5 million dollars, and the expected I.R.R. (Internal Rate of Return) over the period is above 54%.

Financial Highlights

Period

Revenues
($000's)

Operating Profit
($000's)

Operating Profit
(%)

EBITDA
($000's)

Loan Balance
($000's)

20xx

5,495

549

10

617

749

20xx

9,120

1,996

22

2,150

633

20xx

10,140

2,202

22

2,425

505

20xx

11,020

2,354

21

2,636

363

20xx

12,520

2,768

22

3,106

207

Total

48,295

9,869

20

10,933

207

Break Even Analysis

QTY (%)

Revenues ($000's)

Fixed Expenses ($000's)

Variable Expenses ($000's)

Operating Profit ($000's)

10%

4,830

6,908

3,152

(5,231)

20%

9,659

6,908

6,303

(3,553)

30%

14,489

6,908

9,455

(1,875)

40%

19,318

6,908

12,607

(197)

41%

<--------------- Break Even Point ---------------

50%

24,148

6,908

15,759

1,481

60%

28,977

6,908

18,910

3,158

70%

33,807

6,908

22,062

4,836

80%

38,636

6,908

25,214

6,514

90%

43,466

6,908

28,365

8,192

100%

48,295

6,908

31,517

9,869

110%

53,125

6,908

34,669

11,547

Sensitivity (What If) Analysis

% Change

Sales
(K$)

Gross Profit
(K$)

Gross Profit
(%)

Operating Profit
(K$)

Operating Profit
(%)

-20 %

4,396

1,408

32

-373

-8

-10 %

4,945

1,952

39

87

2

0 %

5,495

2,496

45

549

10

10 %

6,044

3,040

50

1,011

16

20 %

6,594

3,584

54

1,472

22

Proforma Profit & Loss Report

20xx

20xx

20xx

20xx

20xx

Revenues

5,495

9,120

10,140

11,020

12,520

Direct Costs

2,876

4,368

4,920

5,418

6,208

Production O/H

55

91

101

110

125

Depreciation

67

153

223

282

338

Gross Profit

2,497

4,507

4,896

5,210

5,849

R&D

497

497

497

497

497

Marketing

848

1,210

1,312

1,400

1,550

G&A

603

804

885

959

1,034

Total Operating Expenses

1,947

2,511

2,694

2,856

3,081

Operating Profit

549

1,996

2,202

2,354

2,768

Interest Expenses

21

80

68

55

40

Interest Income

24

44

78

115

159

Other Income

0

0

0

0

0

Other Expenses

0

0

0

0

0

Income Before Taxes

552

1,960

2,212

2,414

2,886

Income Tax Provision

55

196

221

241

289

Net Profit

497

1,764

1,991

2,173

2,598

Acc. Net Profit

497

2,262

4,252

6,425

9,023

Gross Profit (%)

45

49

48

47

47

Operating Profit (%)

10

22

22

21

22

Net Profit before Tax (%)

10

21

22

22

23

Net Profit after Tax (%)

9

19

20

20

21

Proforma Cash flow report

20xx

20xx

20xx

20xx

20xx

(+) Receivables Payments

4,735

9,120

10,055

10,947

12,395

(-) Purchases Payments

3,304

5,423

5,990

6,549

7,400

(-) Salaries Payments

1,397

1,549

1,704

1,829

1,994

(-) Equipment Payments

400

267

320

320

320

(-) Tax Payments

0

55

196

221

241

Total Disbursements

5,101

7,294

8,210

8,919

9,955

Net Operating Cash Flow

(366)

1,826

1,845

2,027

2,440

(-) Interest Expenses

21

80

68

55

40

(+) Interest Income

24

44

78

115

159

(+) Loans Received

800

0

0

0

0

(-) Loan Payments

51

116

128

142

156

(+) Owners Equity

1,000

0

0

0

0

(-) Dividend Payments

0

0

0

0

0

Cash Flow Requirements

1,386

1,674

1,727

1,946

2,402

Acc. Cash Flow

1,386

3,060

4,787

6,733

9,135

Opening Bank Balance

0

1,386

3,060

4,787

6,733

Net Cash-This Period

1,386

1,674

1,727

1,946

2,402

Closing Bank Balance

1,386

3,060

4,787

6,733

9,135

Credit Line

200

200

200

200

200

Deficit in Funds

0

0

0

0

0

P.V.

(379)

1,381

1,213

1,159

1,213

N.P.V. (Acc.)

(379)

1,001

2,215

3,374

4,587

Proforma Balance Sheet report

20xx

20xx

20xx

20xx

20xx

Cash

1,386

3,060

4,787

6,733

9,135

Receivables

760

760

845

918

1,043

Inventory

728

728

820

903

1,035

Current Assets

2,874

4,548

6,452

8,554

11,213

Fixed Assets

400

720

1,040

1,360

1,680

Acc. Depreciation

67

221

443

725

1,063

Total Assets

3,207

5,047

7,049

9,189

11,830

Payables

905

957

1,071

1,160

1,312

Tax Payable

55

196

221

241

289

S.T. Borrowings

0

0

0

0

0

Current Liabilities

960

1,153

1,292

1,401

1,601

L.T. Borrowings

749

633

505

363

207

Total Liabilities

1,710

1,786

1,797

1,764

1,807

Owners Equity

1,000

1,000

1,000

1,000

1,000

Retained Earnings

497

2,262

4,252

6,425

9,023

Liabilities & Net Worth

3,207

5,047

7,049

9,189

11,830

The Basic Assumptions

The financial projection is based on the following data and assumptions: